THE EMPRICIAL IMPORTANCE OF HABIT FORMATION IN DSGE MODELS: A BAYESIAN INVESTIGATION FOR POLISH ECONOMY

In this paper I present the small scale DSGE model of staggered wage and price contracts with internal habit formation, where the utility from a current consumption is affected by the level of the consumer’s own past consumption. Internal habit formation seems to be a reasonable compromise between catching up with the Joneses, where the reference level of consumption is given by the consumption of representative agent and deep habits. In order to assess the empirical importance of habit formation I estimate and compare using Bayesian techniques two variants of DSGE model: one with habit formation and the other without habit formation. The estimation and comparison is based on quarterly data for Polish economy. The results suggest that model with habit formation is clearly favored by the data. However, obtained Bayes factor seems to be very low in comparison to results for other economies. Comparison of impulse response functions shows that introduction of habit formation has rather limited impact on propagation mechanisms. Moreover, obtained posteriors seem to be stable between these models

The in-sample forecasting performace of New Keynesian small scale DSGE models comparison for Polish economy

This paper compares the in-sample forecasting performance of the new Keynesian small scale DSGE models. The comparison includes the standard sticky prices model and sticky prices and wages model of Erceg, Henderson and Levin. VAR models are used as the baseline. Comparison of forecasting errors has shown that Erceg, Henderson and Levin’s model is characterized by better forecasting performance than the sticky prices model with respect to inflation, production and real wages. Moreover, it better predicts inflation than the VAR models.W pracy dokonano porównania zdolności prognostycznych modeli DSGE małej skali wewnątrz próby. W porównaniu wykorzystano podstawowy, nowokeynesistowski model monetarny oraz model Ercega, Hendersona i Levina, który rozszerza model podstawowy na przypadek lepkich płac nominalnych. Dodatkowo w analizie ujęto modele VAR, które stanowią podstawę ułatwiającą porównania. Porównanie błędów prognoz pokazało, że lepszymi zdolnościami prognostycznymi w przypadku inflacji, produkcji oraz realnej stawki płac charakteryzował się model Ercega, Hendersona i Levina. Model ten charakteryzował się również mniejszymi błędami predykcji inflacji niż modele VAR

THE EMPRICIAL IMPORTANCE OF HABIT FORMATION IN DSGE MODELS: A BAYESIAN INVESTIGATION FOR POLISH ECONOMY

In this paper I present the small scale DSGE model of staggered wage and price contracts with internal habit formation, where the utility from a current consumption is affected by the level of the consumer’s own past consumption. Internal habit formation seems to be a reasonable compromise between catching up with the Joneses, where the reference level of consumption is given by the consumption of representative agent and deep habits. In order to assess the empirical importance of habit formation I estimate and compare using Bayesian techniques two variants of DSGE model: one with habit formation and the other without habit formation. The estimation and comparison is based on quarterly data for Polish economy. The results suggest that model with habit formation is clearly favored by the data. However, obtained Bayes factor seems to be very low in comparison to results for other economies. Comparison of impulse response functions shows that introduction of habit formation has rather limited impact on propagation mechanisms. Moreover, obtained posteriors seem to be stable between these models

Changes in nominal rigidities in Poland – a regime switching DSGE perspective

We estimate a dynamic stochastic general equilibrium model that allows for regimes Markov switching (MS-DSGE). Existing MS-DSGE papers for the United States focus on changes in monetary policy or shocks volatility, contributing the debate on the Great Moderation and/or Volcker disinflation. However, Poland which here serves as an example of a transition country, faced a wider range of structural changes, including long disinflation, EU accession or tax changes. The model identifies high and low rigidity regimes, with the timing consistent with menu cost explanation of nominal rigidities. Estimated timing of the regimes captures the European Union accession and indirect tax changes. The Bayesian model comparison results suggest that model with switching in both analyzed rigidities is strongly favored by the data in comparison with switching only in prices or in wages. Moreover, we find significant evidence in support of independent Markov chains

Measuring uncertainty of optimal simple monetary policy rules in DSGE models

This paper presents a new approach to measure the parameter uncertainty for optimal simple monetary policy rules in the New Keynesian dynamic stochastic general equilibrium models. More precisely, we propose a new algorithm which enables to directly introduce parameter uncertainty into the optimal simple precommitment rule problem. As a result we find distributions of the optimal monetary policy reactions and the minimized welfare losses. To compare the distributions of the monetary policy parameters and the welfare losses we apply the first order stochastic dominance ordering (SD1). The SD1 inequality between the probability distribution is verified by means of the Kolmogorov-Smirnov test. The proposed algorithms are applied to the Erceg, Henderson and Levine (2000) small-scale closed economy model estimated for the Polish economy. For the welfare-loss-minimizing central bank, we examine three types of the dynamic specification of its policy rule: backward-, current- and forward-looking. Finally, for a given set of optimal and implementable monetary policy rules, we show that the fully specified forward-looking monetary policy rule with interest rate smoothing mechanism minimizes the welfare-loss in the sense of the stochastic ordering SD1.This work was supported by the National Science Centre in Poland under Grant No. 2017/26/D/HS4/00942

High-Low Impact Exercise Program Including Pelvic Floor Muscle Exercises Improves Pelvic Floor Muscle Function in Healthy Pregnant Women – A Randomized Control Trial

Background: Pregnancy and high-impact activity are considered as risk factors for pelvic floor dysfunctions, including urinary incontinence.Aim: To investigate whether a structured exercise program, including high- and low-impact aerobics and supported by pelvic floor muscle exercises, improves the neuromuscular activity of the pelvic floor and does not reduce the quality of life in terms of urinary incontinence in healthy pregnant women.Methods: This was a randomized control trial among 97 Caucasian healthy nulliparas in uncomplicated pregnancies (age 30 ± 4 years, 21 ± 5 weeks of gestation; mean ± SD). Women were assessed for pelvic floor muscle functions with surface electromyography (EMG) using vaginal probes and using the Incontinence Impact Questionnaire (IIQ). Only women able to contract pelvic floor muscles and with good quality of life based on IIQ were included for the study. Seventy women in the experimental group took part in a supervised exercise program including high-low impact aerobics and pelvic floor muscle exercises three times a week. Twenty-seven controls did not receive any exercise intervention. After 6 weeks both groups were re-tested with EMG and IIQ. Post- and pre-exercise program changes in each group were analyzed using a repeated-measures ANOVA.Results: Women in the experimental group improved the neuromuscular activity of the pelvic floor in some motor tasks without any adverse outcomes of the intervention. After the exercise program we observed in the experimental group significantly higher EMG amplitude in the pelvic floor muscles during 3-s contractions (p = 0.014). We also noticed a beneficial trend in the increase of neuromuscular activity during 10- and 60-s contractions, but the changes were not statistically significant. The exercising women substantially improved their abilities for relaxation following 3- and 10-s contractions (p = 0.013 and p < 0.001). In controls, we reported no statistically significant improvement in either of the motor tasks. All study participants maintained good quality of life related to urinary incontinence.Conclusion: Prenatal exercise programs that include high- and low-impact aerobics and are supported by pelvic floor muscle exercises should be recommended for pregnant women, especially those who are accustomed to higher exercise intensity before pregnancy. Nevertheless, these recommendations can be directed to continent women who can properly contract pelvic floor muscles.ISRCTN. DOI: 10.1186/ISRCTN92265528: “Pelvic floor muscle training with surface electromyography”, retrospectively registered on the 25th of July, 2016

Nominal Wage Rigidities in Small Scale DSGE Models: An Empirical Analysis for Poland

The paper examines the empirical importance of the assumption of "sticky wages" in small‑scale dynamic stochastic general equilibrium (DSGE) models estimated for the Polish economy. The evaluation is based on a Bayesian comparison between the baseline "sticky price" model and a model of price and wage rigidities. The comparison includes extensions of these models to account for the case of price and wage indexation. The analysis consists of two steps. In the first step, each model is estimated using quarterly data for the Polish economy from 1995 to 2011. In the second step, the "marginal data density" is calculated for each model and so‑called Bayes factors are obtained. The results suggest that the best fit to the sample is observed in the case of the model with wage and price rigidities. Moreover, price and wage indexation mechanisms seem to have an insignificant impact on how the model fits the data, the author says. A comparison of impulse response functions shows that there are significant differences between the baseline model and the model with sticky prices and wages. Moreover, the estimates of structural parameters were strongly affected by the introduction of wage rigidities, the author says.Celem pracy jest empiryczna weryfikacja założenia o istnieniu sztywności płac nominalnych w modelach DSGE, estymowanych dla gospodarki polskiej. Weryfikacja ta została dokonana dzięki bayesowskiemu porównaniu modelu lepkich cen z modelem lepkich cen i płac, a także z ich rozszerzeniami na przypadek indeksacji. Podstawę porównania stanowiły kwartalne dane z lat 1995–2011, na podstawie których oszacowano każdy z analizowanych modeli. Następnie, dla każdego z nich obliczono gęstość brzegową oraz odniesiono je do siebie uzyskując czynnik Bayesa. Uzyskane wyniki dowodzą, że model lepkich płac i cen charakteryzuje się najlepszym dopasowaniem do analizowanej próby. Założenie indeksacji nie wpływało istotnie na dopasowanie modelu do danych zarówno w przypadku modelu o doskonale elastycznych, jak i lepkich płacach nominalnych. Ponadto porównanie funkcji reakcji na impuls pokazało, że model o lepkich cenach i płacach nominalnych implikuje inne, niż model lepkich cen, funkcje reakcji na impuls. Jednocześnie otrzymane oszacowania parametrów były w znacznym stopniu determinowane przez założenie sztywności nominalnej płac

The Hansen Real Business Cycle Model and Its Application in the Polish Economy

The paper analyzes the so-called real business cycle model developed by American economist Gary D. Hansen. The model is expanded to include an indivisible labor mechanism. The aim is to check the model in terms of its accuracy in explaining business cycle fluctuations in Poland. The first part of the article discusses the assumptions and structure of the model. The authors define a state of stationary equilibrium and the final form of the model-a system of log-linearized equations. In the second part of the paper, the authors calibrate the structural parameters and conduct an empirical analysis of the Hansen model, beginning with the characteristics of the variables used in the study and the value of the model’s parameters. The model is solved and the reactions of individual variables to a technological shock are analyzed. The coefficients of correlation and the deviations of standard simulated and real variables show that the model correctly reflects the direction and strength of the relationships between the variables, the authors say. Positive correlations were obtained between all the simulated variables, in the same way as in the case of actual data. At the same time, in the case of simulated data, much higher correlations were obtained between capital and consumption and between technological changes and labor than in the case of actual data. As part of the study, an analysis was also conducted of the reactions of variables to a technological shock introduced to the model on an impulse basis. The strongest reaction to the shock was recorded in the case of labor supply and production. Moreover, in the same way as for actual data, the authors found that the fluctuations of consumption are much weaker than the fluctuations of production. This stems from the fact that households tend to smooth out consumption over time, Kuchta and Piłat say. The obtained results confirm that the dynamism of the Hansen real business cycle model, despite its simplicity, relatively accurately reflects the changes in Poland’s key macroeconomic variables

An Influence of a Degree of Central Bank Independence on a Rate of Inflation

Autorzy chcą serdecznie podziękować prof. S. Krajewskiemu, prof. dr. hab. E. Kwiatkowskiemu, dr. A. Stępniak-Kucharskiej, dr. J. Pruskiemu oraz mgr. J. Kowalskiemu z Instytutu Ekonomii Uniwersytetu Łódzkiego oraz prof. N. Łapińskiej-Sobczak z Instytutu Ekonometrii i Statystyki UŁ za cenne uwagi zgłoszone podczas pracy nad tekstem.he objective of the article is an analysis of influence of a degree of central bank independence on a rate of inflation. Inflation theories of dynamic inconsistency were developed e.g. by Kydland and Prescott [1977], Barro and Gordon [1983] and Rogoff [1985]. On the basis of mentioned theories higher degree of central bank independence may result in lower rate of inflation. The first part of the article presents theorical basis of analysed relationship and is based on articles by Rogoff [1985], Alesina and Summers [1993], Posen [1993] and Eijjfinger and de Hann [1996]. However, the theory does not conclusively indicate the direction of this influence. Hence, the aroused purpose was to verify whether an institutional forms of monetary policy influences the rate of inflation. The next part includes empirical research. The degree of central bank independence was described by qualitative measures, which as well as transformed rate of inflation were derived from articles by Grilli, Masciandaro, Tabellini [1991] and Cukierman, Webb, Neyapti [1992]. The relation was estimated with the use of a linear regression. Results suggest that the influence of the degree of central bank independence on the rate of inflation is negative. Research done by other authors confirm the hypothesis pointed out in the article, however further analyses are recommended. Remove selectedZadanie pt. „Digitalizacja i udostępnienie w Cyfrowym Repozytorium Uniwersytetu Łódzkiego kolekcji czasopism naukowych wydawanych przez Uniwersytet Łódzki” nr 885/P-DUN/2014 zostało dofinansowane ze środków MNiSW w ramach działalności upowszechniającej naukę